Missouri Nonprofit Offers St. Louis Payday Loans Alternative
Inside Subprime: May 6, 2019
By Lindsay Frankel
People working in St. Louis County and St. Louis City may find financial relief from unexpected hardships without needing to take out a payday loan, thanks to a program provided through a community action agency. Participating business can provide small, affordable loans to their employees through the program.
Payday loans are short-term, small-dollar loans with exorbitantly high interest rates and fees. They are typically appealing to people who have poor or no credit and lack access to loans from traditional financial institutions. In 8.5 percent of Missouri households, no one holds a bank account, according to the FDIC. Those who turn to payday loans for quick cash find this method of borrowing is extremely expensive. Payday loans in Missouri cost borrowers an average of 455 percent APR, according to data from Pew Charitable Trusts.
Unfortunately, payday lenders prey on the most vulnerable Missourians who often lack the means to pay back their loans on time. This leads to re-borrowing, creating a cycle of debt that can be difficult to overcome. The average income of Missourians using payday loans was just under $25,000, according to a study conducted by the Missouri Division of Finance in 2007. That same year, 12 percent of all payday loans were made to people who were on disability or Supplemental Security Income. Payday lenders are also known to target low-income minorities and military service-members.
Some cities such as Springfield, have considered establishing local rules governing payday loans. Councilman Matthew Simpson called payday loans “obscene and predatory” and said he hopes the state would consider tightening regulations.
Learn more about payday loans, scams, and cash advances, and check out our city and state financial guides, including Missouri, Columbia, Independence, Jefferson City, Joplin, Kansas City, Springfield, St. Louis, Illinois, Chicago, Texas and more.